File No. 333-81807
AS FILED SEPTEMBER 28, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. |1|
(Check appropriate box or boxes)
FRANKLIN REAL ESTATE SECURITIES TRUST
(Exact Name of Registrant as Specified in Charter)
(650) 312-2000
(Area Code and Telephone Number)
777 MARINERS ISLAND BLVD.
SAN MATEO, CA 94404
Address of Principal Executive Offices:
(Number, Street, City, State, Zip Code)
DEBORAH R. GATZEK, ESQUIRE
777 MARINERS ISLAND BLVD.
SAN MATEO, CA 94404
Name and Address of Agent for Service:
(Number and Street) (City) (State) (Zip Code)
Copies to:
BRUCE G. LETO, ESQUIRE
STRADLEY RONON STEVENS & YOUNG, LLP
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PA 19103
Approximate Date of Proposed Public Offering: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE IMMEDIATELY PURSUANT TO
RULE 485(B) UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
TITLE OF THE SECURITIES BEING REGISTERED: SHARES OF BENEFICIAL INTEREST, PAR
VALUE $.01 PER SHARE, OF FRANKLIN REAL ESTATE SECURITIES FUND - CLASS A AND
FRANKLIN REAL ESTATE SECURITIES FUND - CLASS C. NO FILING FEE IS DUE BECAUSE
REGISTRANT IS RELYING ON SECTION 24(F) OF THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED.
PART C. OTHER INFORMATION
Item 15. INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Please see the Declaration of Trust, By-Laws, Management Agreement, and
Distribution Agreements previously filed as exhibits and incorporated herein
by reference.
Item 16. EXHIBITS (Incorporated by reference to the filings as noted)
The following exhibits are incorporated herein by reference to the
previously filed document indicated below, except as noted:
(1) Copies of the charter of the Registrant as now in effect:
(i) Certificate of Trust of Franklin Real Estate
Securities Trust dated September 14, 1993
Filing: Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 30, 1995
(ii) Agreement and Declaration of Trust of Franklin
Real Estate Securities Trust dated September
14, 1993
Filing: Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 30, 1995
(iii) Certificate of Amendment of Agreement and
Declaration of Trust of Franklin Real Estate
Securities Trust dated February 16, 1995.
Filing: Post-Effective Amendment No. 4
to Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 30, 1995
(2) Copies of the existing By-laws or corresponding instruments of
the Registrant:
(i) By-Laws of Franklin Real Estate Securities Trust
Filing: Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 30, 1995
(ii) Amendment to the By-Laws dated October 27, 1994
Filing: Post-Effective Amendment No. 7 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: August 29, 1997
(3) Copies of any voting trust agreement affecting more than 5
percent of any class of equity securities of the Registrant:
Not Applicable
(4) Agreement and Plan of Reorganization dated July 27, 1999
(5) Copies of all instruments defining the rights of holders of the
securities being registered including, where applicable, the
relevant portion of the articles of incorporation or by-laws of
the Registrant:
Not Applicable
(6) Copies of all investment advisory contracts relating to the
management of the assets of the Registrant:
(i) Management Agreement between Registrant on
behalf of Franklin Real Estate Securities Fund
and Franklin Advisers, Inc., dated January 3,
1994
Filing: Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 30, 1995
(ii) Amendment to Management Agreement between
Franklin Real Estate Securities Trust, on
behalf of Franklin Real Estate Securities
Fund, and Franklin Advisers Inc., dated August
1, 1995
Filing: Post-Effective Amendment No. 5
to Registration Statement on Form N-1A
File No. 33-69048
Filing Date: August 21, 1996
(7) Copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers:
(i) Amended and Restated Distribution Agreement between
Registrant and Franklin/Templeton Distributors, Inc.,
dated April 23, 1995
Filing: Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 30, 1995
(ii) Amendment of Amended and Restated Distribution
Agreement between Registrant and Franklin/Templeton
Distributors, Inc., dated January 12, 1999
Filing: Post-Effective Amendment No. 10 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 28, 1999
(iii) Forms of Dealer Agreements between Franklin/Templeton
Distributors, Inc. and Securities Dealers dated March
1, 1998
Filing: Post-Effective Amendment No. 9 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: December 23, 1998
(8) Copies of all bonus, profit sharing, pension or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Registrant in their capacity as
such. Furnish a reasonably detailed description of any plan that
is not set forth in a formal document.
Not Applicable
(9) Copies of all custodian agreements and depository contracts under
Section 17(f) of the 1940 Act for securities and similar
investments of the Registrant, including the schedule of
remuneration:
(i) Master Custodian Agreement between Registrant and
Bank of New York dated February 16, 1996
Filing: Post-Effective Amendment No. 5 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: August 21, 1996
(ii) Amendment dated May 7, 1997 to Master Custody Agreement
between Registrant and Bank of New York dated February 16,
1996
Filing: Post-Effective Amendment No. 8 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 19, 1998
(iii) Amendment dated February 27, 1998 to Master Custody
Agreement between Registrant and Bank of New York
dated February 16, 1996
Filing: Post-Effective Amendment No. 10 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 28, 1999
(iv) Terminal Link Agreement between Registrant and Bank
of New York dated February 16, 1996
Filing: Post-Effective Amendment No. 5 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: August 21, 1996
(v) Foreign Custody Manager Agreement between the
Registrant and The Bank of New York dated February
27, 1998
Filing: Post-Effective Amendment No. 9 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: December 23, 1998
(10) Copies of any plan entered into by Registrant pursuant to Rule
12b-1 under the 1940 Act, and any agreements with any person
relating to implementation of the plan, and copies of any plan
entered into by Registrant pursuant to Rule 18f-3 under the 1940
Act, any agreements with any person relating to the
implementation of the plan, any amendment to the plan, and a copy
of the portion of the minutes of the Registrant's directors
describing any action taken to revoke the plan.
(i) Plan of Distribution pursuant to Rule 12b-1 dated
January 3, 1994
Filing: Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 30, 1995
(ii) Class II Distribution Plan pursuant to Rule 12b-1
dated March 30, 1995
Filing: Post-Effective Amendment No. 4 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 30, 1995
(iii) Class B Distribution Plan pursuant to Rule 12b-1
dated October 16, 1998
Filing: Post-Effective Amendment No. 10 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 28, 1999
(iv) Form of Multiple Class Plan
Filing: Post-Effective Amendment No. 10 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: June 28, 1999
(11) An opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will, when
sold, be legally issued, fully paid and non-assessable:
(i) Opinion and Consent of Counsel
Filing: Post-Effective Amendment No. 9 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: December 23, 1998
(12) An opinion, and consent to their use, of counsel or, in lieu of
an opinion, a copy of the revenue ruling from the Internal
Revenue Service, supporting the tax matters and consequences to
shareholders discussed in the prospectus:
(i) Opinion, and consent to its use, of counsel, supporting the
tax matters and consequences to shareholders discussed in
the prospectus dated September 23, 1999.
(13) Copies of all other material contracts of the Registrant not made
in the ordinary course of business which are to be performed in
whole or in part on or after the date of filing the Registration
Statement:
(i) Subcontract for Fund Administrative Services dated
October 1, 1996, as amended, April 30, 1998, between
Franklin Advisers, Inc. and Franklin Templeton
Services Inc.
Filing: Post-Effective Amendment No. 9 to
Registration Statement on Form N-1A
File No. 33-69048
Filing Date: December 23, 1998
(14) Copies of any other opinions, appraisals or rulings, and consents
to their use relied on in preparing the registration statement
and required by Section 7 of the 1933 Act:
Not Applicable
(15) All financial statements omitted pursuant to Item 14(a)(1):
Not Applicable
(16) Manually signed copies of any power of attorney pursuant to which
the name of any person has been signed to the Registration
Statement.
(i) Power of Attorney dated April 15, 1999
Filing: Registration Statement on Form N-14
File No. 333-81807
Date: June 29, 1999
Item 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may
be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed as a part
of an amendment to the registration statement and will not be
used until the amendment is effective, and that, in determining
any liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new Registration Statement for the
securities offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide offering of
them.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of San Mateo, and
the State of California, on the 28th day of September, 1999.
FRANKLIN REAL ESTATE SECURITIES TRUST
(Registrant)
By:/s/ LEIANN NUZUM
Leiann Nuzum
Assistant Secretary
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated:
RUPERT H. JOHNSON, JR.* Principal Executive Officer and Trustee
Rupert H. Johnson, Jr. Dated: September 28, 1999
CHARLES B. JOHNSON* Trustee
Charles B. Johnson Dated: September 28, 1999
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: September 28, 1999
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: September 28, 1999
FRANK H. ABBOTT III* Trustee
Frank H. Abbot III Dated: September 28, 1999
HARRIS J. ASHTON* Trustee
Harris J. Ashton Dated: September 28, 1999
HARMON E. BURNS* Trustee
Harmon E. Burns Dated: September 28, 1999
ROBERT F. CARLSON* Trustee
Robert F. Carlson Dated: September 28, 1999
S. JOSEPH FORTUNATO* Trustee
S. Joseph Fortunato Dated: September 28, 1999
FRANK W.T. LAHAYE* Trustee
Frank W.T. LaHaye Dated: September 28, 1999
GORDON S. MACKLIN* Trustee
Gordon S. Macklin Dated: September 28, 1999
*By: /S/ LEIANN NUZUM
Leiann Nuzum, Attorney-in-Fact
(pursuant to Power of Attorney previously filed)
FRANKLIN REAL ESTATE SECURITIES TRUST
REGISTRATION STATEMENT ON FORM N-14
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.(1)(i) Certificate of Trust of Franklin Real Estate *
Securities Trust dated September 14, 1993
EX-99.(1)(ii) Agreement and Declaration of Trust of *
Franklin Real Estate Securities Trust dated
September 14, 1993
EX-99.(1)(iii) Certificate of Amendment of Agreement and *
Declaration of Trust of Franklin Real Estate
Securities Trust dated February 16, 1995
EX-99.(2) (i) By-Laws *
EX-99.(2)(ii) Amendment to the By-Laws dated October 27, *
1994
EX-99.(4) Agreement and Plan of Reorganization Dated Attached
July 27, 1999
EX-99.(6)(i) Management Agreement between the Registrant, *
on behalf of Franklin Real Estate Securities
Fund, and Franklin Advisers, Inc., dated
January 3, 1994
EX-99.(6)(ii) Amendment to Management Agreement between *
the Registrant, on behalf of Franklin Real
Estate Securities Fund, dated August 1, 1995
EX-99.(7)(i) Amended and Restated Distribution Agreement *
between Registrant and Franklin/Templeton
Distributors, Inc., dated April 23, 1995
EX-99.(7)(ii) Amendment of Amended and Restated *
Distribution Agreement between Registrant
and Franklin/Templeton Distributors, Inc.,
dated January 12, 1999
EX-99.(7)(iii) Forms of Dealer Agreements between *
Franklin/Templeton Distributors, Inc., and
Securities Dealers
EX-99.(9)(i) Master Custodian Agreement between *
Registrant and Bank of New York dated
February 16, 1996
EX-99.(9)(ii) Amendment dated May 7, 1997 to Master *
Custody Agreement between Registrant and
Bank of New York
EX-99.(9)(iii) Amendment dated February 27, 1998 to Master *
Custody Agreement between Registrant and
Bank of New York
EX-99.(9)(iv) Terminal Link Agreement between Registrant *
and Bank of New York dated February 16, 1996
EX-99.(9)(v) Foreign Custody Manager Agreement between *
the Registrant and The Bank of New York
dated dated February 27, 1998
EX-99.(10)(i) Distribution Plan pursuant to Rule 12b-1 *
dated January 3, 1994
EX-99.(10)(ii) Class II Distribution Plan pursuant to Rule *
12b-1 dated March 30, 1995
EX-99.(10)(iii) Class B Distribution Plan pursuant to Rule *
12b-1 dated October 16, 1998
EX-99.(10)(iv) Multiple Class Plan *
EX-99.(11)(i) Opinion and consent of counsel *
EX-99.(12)(i) Opinion and Consent of counsel Attached
supporting tax matters
EX-99.(13)(i) Subcontract for Fund Administrative Services *
dated October 1, 1996 as amended March 11,
1998 between Franklin Advisers, Inc. and
Franklin Templeton Services, Inc.
EX-99.(16)(i) Power of Attorney dated April 15, 1999 *
*Incorporated by Reference
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement and Plan"), made
as of this 27th day of July, 1999, by and between Franklin Real Estate
Securities Trust (the "Trust"), a business trust created under the laws of
the State of Delaware in 1993, with its principal place of business at 777
Mariners Island Boulevard, San Mateo, California 94404, on behalf of Franklin
Real Estate Securities Fund, a series of shares of the Trust ("Franklin
Fund"), and Templeton Global Real Estate Fund ("Templeton Fund"), a business
trust created under the laws of the Commonwealth of Massachusetts in 1989,
with its principal place of business at 500 East Broward Boulevard, Fort
Lauderdale, Florida 33394.
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by the Trust, on behalf
of Franklin Fund, of substantially all of the property, assets and goodwill
of Templeton Fund in exchange solely for shares of beneficial interest, par
value $0.01 per share, of Franklin Fund - Class A ("Franklin Fund Class A
Shares") and shares of beneficial interest, par value $0.01 per share, of
Franklin Fund - Class C ("Franklin Fund Class C Shares") (collectively,
"Franklin Fund Shares"); (ii) the distribution of (a) Franklin Fund Class A
Shares to the shareholders of Templeton Fund -- Class A shares ("Templeton
Fund Class A Shares") and (b) Franklin Fund Class C Shares to the
shareholders of Templeton Fund -- Class C shares ("Templeton Fund Class C
Shares"), according to their respective interests; and (iii) the subsequent
dissolution of Templeton Fund as soon as practicable after the closing (as
defined in Section 3, hereinafter called the "Closing"), all upon and subject
to the terms and conditions of this Agreement and Plan hereinafter set forth.
AGREEMENT
In order to consummate the Plan of Reorganization and in consideration
of the promises and of the covenants and agreements hereinafter set forth,
and intending to be legally bound, the parties hereto covenant and agree as
follows:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF TEMPLETON
FUND.
(a) Subject to the terms and conditions of this Agreement and Plan,
and in reliance on the representations and warranties of the Trust herein
contained, and in consideration of the delivery by the Trust of the number of
Franklin Fund Class A Shares and Franklin Fund Class C Shares hereinafter
provided, Templeton Fund agrees that it will convey, transfer and deliver to
the Trust, on behalf of Franklin Fund, at the Closing all of Templeton Fund's
then existing assets, free and clear of all liens, encumbrances, and claims
whatsoever (other than shareholders' rights of redemption), except for cash,
bank deposits, or cash equivalent securities in an estimated amount necessary
to: (i) pay the costs and expenses of carrying out this Agreement and Plan
(including, but not limited to, fees of counsel and accountants, and expenses
of its liquidation and dissolution contemplated hereunder), which costs and
expenses shall be established on Templeton Fund's books as liability
reserves; (ii) discharge its unpaid liabilities on its books at the closing
date (as defined in Section 3, hereinafter called the "Closing Date"),
including, but not limited to, its income dividends and capital gains
distributions, if any, payable for the period prior to, and through, the
Closing Date; and (iii) pay such contingent liabilities as the Board of
Trustees shall reasonably deem to exist against Templeton Fund, if any, at
the Closing Date, for which contingent and other appropriate liability
reserves shall be established on Templeton Fund's books (hereinafter "Net
Assets"). Templeton Fund shall also retain any and all rights that it may
have over and against any person that may have accrued up to and including
the close of business on the Closing Date.
(b) Subject to the terms and conditions of this Agreement and Plan,
and in reliance on the representations and warranties of Templeton Fund
herein contained, and in consideration of such sale, conveyance, transfer,
and delivery, the Trust agrees at the Closing to deliver to Templeton Fund:
(i) the number of Franklin Fund Class A Shares, determined by dividing the
net asset value per share of Templeton Fund Class A Shares by the net asset
value per share of Franklin Fund Class A Shares, and multiplying the result
thereof by the number of outstanding Templeton Fund Class A Shares, as of
1:00 p.m. Pacific time on the Closing Date; and (ii) the number of Franklin
Fund Class C Shares, determined by dividing the net asset value per share of
Templeton Fund Class C Shares by the net asset value per share of Franklin
Fund Class C Shares, and multiplying the result thereof by the number of
outstanding Templeton Fund Class C Shares, as of 1:00 p.m. Pacific time on
the Closing Date. All such values shall be determined in the manner and as of
the time set forth in Section 2 hereof.
(c) Immediately following the Closing, Templeton Fund shall dissolve
and distribute pro rata to its shareholders of record as of the close of
business on the Closing Date Franklin Fund Shares received by Templeton Fund
pursuant to this Section 1. Such liquidation and distribution shall be
accomplished by the establishment of accounts on the share records of
Templeton Fund of the type and in the amounts due such shareholders based on
their respective holdings as of the close of business on the Closing Date.
Fractional Franklin Fund Shares shall be carried to the third decimal place.
As promptly as practicable after the Closing, each holder of any outstanding
certificate or certificates representing shares of beneficial interest of
Templeton Fund shall be entitled to surrender the same to the transfer agent
for Franklin Fund in exchange for the number of Franklin Fund Shares into
which the shares of Templeton Fund theretofore represented by the certificate
or certificates so surrendered shall have been converted. Certificates for
Franklin Fund Shares shall not be issued, unless specifically requested by
the shareholders. Until so surrendered, each outstanding certificate which,
prior to the Closing, represented shares of beneficial interest of Templeton
Fund shall be deemed for all Franklin Fund's purposes to evidence ownership
of the number of Franklin Fund Shares into which the shares of beneficial
interest of Templeton Fund (which prior to the Closing were represented
thereby) have been converted.
2. VALUATION.
(a) The value of Templeton Fund's Net Assets to be acquired by the
Trust, on behalf of Franklin Fund, hereunder shall be computed as of 1:00
p.m. Pacific time on the Closing Date using the valuation procedures set
forth in Templeton Fund's currently effective prospectus.
(b) The net asset value of a share of beneficial interest of
Franklin Fund Class A Shares and of Franklin Fund Class C Shares shall be
determined to the nearest full cent as of 1:00 p.m. Pacific time on the
Closing Date using the valuation procedures set forth in Franklin Fund's
currently effective prospectus.
(c) The net asset value of a share of beneficial interest of
Templeton Fund Class A Shares and of Templeton Fund Class C Shares shall be
determined to the fourth decimal place as of 1:00 p.m. Pacific time on the
Closing Date using the valuation procedures set forth in Templeton Fund's
currently effective prospectus.
3. CLOSING AND CLOSING DATE.
The Closing Date shall be September 23, 1999, or such later date as the
parties may mutually agree. The Closing shall take place at the principal
office of the Trust at 2:00 p.m. Pacific time on the Closing Date. Templeton
Fund shall have provided for delivery as of the Closing of those Net Assets
of Templeton Fund to be transferred to Franklin Fund's Custodian, Bank of New
York, Mutual Funds Division, 90 Washington Street, New York, New York 10286.
Also, Templeton Fund shall deliver at the Closing a list of names and
addresses of the shareholders of record of its Templeton Fund Class A Shares
and Templeton Fund Class C Shares and the number of shares of beneficial
interest of such classes owned by each such shareholder, indicating thereon
which such shares are represented by outstanding certificates and which by
book-entry accounts, all as of 1:00 p.m. Pacific time on the Closing Date,
certified by its transfer agent or by its President to the best of its or his
knowledge and belief. The Trust shall issue and deliver a certificate or
certificates evidencing the shares of beneficial interest of Franklin Fund to
be delivered to said transfer agent registered in such manner as Templeton
Fund may request, or provide evidence satisfactory to Templeton Fund that
such Franklin Fund Shares have been registered in an account on the books of
Franklin Fund in such manner as Templeton Fund may request.
4. Representations and Warranties by Templeton Fund.
Templeton Fund represents and warrants to the Trust that:
(a) Templeton Fund is a business trust created under the laws of the
Commonwealth of Massachusetts on July 17, 1989, and is validly existing and
in good standing under the laws of that Commonwealth. Templeton Fund is duly
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a diversified, open-end, management investment company and all its
shares sold were sold pursuant to an effective registration statement filed
under the Securities Act of 1933, as amended (the "1933 Act"), except for
those shares sold pursuant to the private offering exemption for the purpose
of raising the required initial capital.
(b) Templeton Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $0.01 per share, each outstanding
share of which is fully paid, non-assessable, freely transferable and has
full voting rights.
(c) The financial statements appearing in Templeton Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 1998, audited by
McGladrey & Pullen LLP, and SemiAnnual Report to Shareholders for the six
month period ended February 28, 1999, copies of which have been delivered to
the Trust, fairly present the financial position of Templeton Fund as of such
dates and the results of its operations for the periods indicated in
conformity with generally accepted accounting principles applied on a
consistent basis.
(d) The books and records of Templeton Fund made available to the
Trust and/or its counsel accurately summarize the accounting data represented
and contain no material omissions with respect to the business and operations
of Templeton Fund.
(e) Templeton Fund has the necessary power and authority to conduct
its business as such business is now being conducted.
(f) Templeton Fund is not a party to or obligated under any
provision of its Amended and Restated Declaration of Trust or By-laws, or any
contract or any other commitment or obligation, and is not subject to any
order or decree that would be violated by its execution of or performance
under this Agreement and Plan.
(g) Templeton Fund has elected to be treated as a regulated
investment company ("RIC") for federal income tax purposes under Part I of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
has qualified as a RIC for each taxable year since its inception, and will
qualify as a RIC as of the Closing Date.
5. REPRESENTATIONS AND WARRANTIES BY THE TRUST.
The Trust represents and warrants to Templeton Fund that:
(a) The Trust is a business trust created under the laws of the
State of Delaware on September 22, 1993, and is validly existing and in good
standing under the laws of that state. The Trust is duly registered under the
1940 Act as an open-end, management investment company and all of Franklin
Fund's shares sold were sold pursuant to an effective registration statement
filed under the 1933 Act, except for those shares sold pursuant to the
private offering exemption for the purpose of raising the required initial
capital.
(b) The Trust is authorized to issue an unlimited number of shares
of beneficial interest, par value $0.01 per share, each outstanding share of
which is fully paid, non-assessable, freely transferable, and has full voting
rights. Franklin Fund Shares to be issued pursuant to this Agreement and Plan
will be fully paid, non-assessable, freely transferable and have full voting
rights.
(c) At the Closing, Franklin Fund Class A Shares will be eligible
for offering to the public in those states of the United States and
jurisdictions in which the shares of Templeton Fund Class A Shares are
presently eligible for offering to the public, and Franklin Fund Class C
Shares will be eligible for offering to the public in those states of the
United States and jurisdictions in which the shares of Templeton Fund Class C
Shares are presently eligible for offering to the public; and there are a
sufficient number of Franklin Fund Class A Shares and Franklin Fund Class C
Shares registered under the 1933 Act to permit the transfers contemplated by
this Agreement and Plan to be consummated.
(d) The financial statements appearing in the Trust's Annual Report
to Shareholders for the fiscal year ended April 30, 1999, audited by
PricewaterhouseCoopers LLP, copies of which have been delivered to Templeton
Fund, fairly present the financial position of Franklin Fund as of such date
and the results of its operations for the period indicated in conformity with
generally accepted accounting principles applied on a consistent basis.
(e) The Trust has the necessary power and authority to conduct
Franklin Fund's business as such business is now being conducted.
(f) The Trust is not a party to or obligated under any provision of
the Trust's Agreement and Declaration of Trust or By-laws, or any contract or
any other commitment or obligation, and is not subject to any order or
decree, that would be violated by the Trust's execution of or performance
under this Agreement and Plan.
(g) The Trust has elected to treat Franklin Fund as a RIC for
federal income tax purposes under Part I of Subchapter M of the Code, and
Franklin Fund has qualified as a RIC for each taxable year since its
inception and will qualify as a RIC as of the Closing Date.
6. REPRESENTATIONS AND WARRANTIES BY TEMPLETON FUND AND THE TRUST.
Templeton Fund and the Trust each represents and warrants to the other
that:
(a) The statement of assets and liabilities to be furnished by it as
of 1:00 p.m. Pacific time on the Closing Date for the purpose of determining
the number of Franklin Fund Shares to be issued pursuant to Section 1 of this
Agreement and Plan will accurately reflect its Net Assets in the case of
Templeton Fund and its net assets in the case of Franklin Fund, and
outstanding shares of beneficial interest, as of such date, in conformity
with generally accepted accounting principles applied on a consistent basis.
(b) At the Closing, it will have good and marketable title to all of
the securities and other assets shown on the statement of assets and
liabilities referred to in "(a)" above, free and clear of all liens or
encumbrances of any nature whatsoever, except such imperfections of title or
encumbrances as do not materially detract from the value or use of the assets
subject thereto, or materially affect title thereto.
(c) Except as disclosed in its currently effective prospectus, there
is no material suit, judicial action, or legal or administrative proceeding
pending or threatened against it.
(d) There are no known actual or proposed deficiency assessments
with respect to any taxes payable by it.
(e) The execution, delivery, and performance of this Agreement and
Plan have been duly authorized by all necessary action of its Board of
Trustees, and this Agreement and Plan constitutes a valid and binding
obligation enforceable in accordance with its terms.
(f) It anticipates that consummation of this Agreement and Plan will
not cause it, in the case of Templeton Fund, and Franklin Fund, in the case
of the Trust, to fail to conform to the requirements of Subchapter M of the
Code for federal income taxation as a RIC at the end of its fiscal year.
(g) It has the necessary power and authority to conduct its
business, in the case of Templeton Fund, and Franklin Fund's business, in the
case of the Trust, as such business is now being conducted.
7. COVENANTS OF TEMPLETON FUND AND THE TRUST.
(a) Templeton Fund and the Trust, on behalf of Franklin Fund, each
covenant to operate their respective businesses as presently conducted
between the date hereof and the Closing.
(b) Templeton Fund undertakes that it will not acquire Franklin Fund
Shares for the purpose of making distributions thereof to anyone other than
Templeton Fund's shareholders.
(c) Templeton Fund undertakes that, if this Agreement and Plan is
consummated, it will file an application pursuant to Section 8(f) of the 1940
Act for an order declaring that it has ceased to be an investment company.
(d) Templeton Fund and the Trust each agree that, by the Closing,
all of their federal and other tax returns and reports required by law to be
filed by Templeton Fund or by the Trust, on behalf of Franklin Fund, on or
before such date shall have been filed, and all Federal and other taxes shown
as due on said returns shall have either been paid or adequate liability
reserves shall have been provided for the payment of such taxes.
(e) At the Closing, Templeton Fund will provide the Trust with a
copy of the shareholder ledger accounts, certified by its transfer agent or
its President to the best of its or his knowledge and belief, for all the
shareholders of record of its shares as of 1:00 p.m. Pacific time on the
Closing Date who are to become shareholders of Franklin Fund as a result of
the transfer of assets that is the subject of this Agreement and Plan.
(f) Templeton Fund agrees to mail to each shareholder of record
entitled to vote at the meeting of its shareholders at which action on this
Agreement and Plan is to be considered, in sufficient time to comply with
requirements as to notice thereof, a Combined Prospectus and Proxy Statement
that complies in all material respects with the applicable provisions of
Section 14(a) of the Securities Exchange Act of 1934, as amended, and Section
20(a) of the 1940 Act, and the rules and regulations, respectively,
thereunder.
(g) The Trust will file with the U.S. Securities and Exchange
Commission a registration statement on Form N-14 under the 1933 Act relating
to Franklin Fund Shares issuable hereunder ("Registration Statement"), and
will use its best efforts to provide that the Registration Statement becomes
effective as promptly as practicable. At the time it becomes effective, the
Registration Statement will (i) comply in all material respects with the
applicable provisions of the 1933 Act, and the rules and regulations
promulgated thereunder; and (ii) not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. At the time the
Registration Statement becomes effective, at the time of Templeton Fund's
shareholders' meeting, and at the Closing Date, the prospectus and statement
of additional information included in the Registration Statement will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY TEMPLETON FUND AND THE TRUST.
The obligations of Templeton Fund and the Trust to effectuate this
Agreement and Plan hereunder shall be subject to the following respective
conditions:
(a) That: (i) all the representations and warranties of the other
party contained herein shall be true and correct as of the Closing with the
same effect as though made as of and at such date; (ii) the other party shall
have performed all obligations required by this Agreement and Plan to be
performed by it prior to the Closing; and (iii) the other party shall have
delivered to such party a certificate signed by the President and by the
Secretary or equivalent officer to the foregoing effect.
(b) That each party shall have delivered to the other party a copy
of the resolutions approving this Agreement and Plan adopted by its Board of
Trustees certified by its Secretary or equivalent officer.
(c) That the U.S. Securities and Exchange Commission shall not have
issued an unfavorable management report under Section 25(b) of the 1940 Act
or instituted or threatened to institute any proceeding seeking to enjoin
consummation of the Plan of Reorganization under Section 25(c) of the 1940
Act. And, further, no other legal, administrative or other proceeding shall
have been instituted or threatened that would materially affect the financial
condition of either party or would prohibit the transactions contemplated
hereby.
(d) That this Agreement and Plan and the Plan of Reorganization
contemplated hereby shall have been adopted and approved by the appropriate
action of the shareholders of Templeton Fund at an annual or special meeting
or any adjournment thereof.
(e) That Templeton Fund shall have declared a distribution or
distributions prior to the Closing Date that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i)
all of its net investment income and all of its net realized capital gains,
if any, for the period from the close of its last fiscal year to 1:00 p.m.
Pacific time on the Closing Date; and (ii) any undistributed net investment
income and net realized capital gains from any period to the extent not
otherwise declared for distribution.
(f) That there shall be delivered to Templeton Fund and the Trust an
opinion from Messrs. Stradley Ronon Stevens & Young, LLP, counsel to
Templeton Fund and the Trust, to the effect that, provided the acquisition
contemplated hereby is carried out in accordance with this Agreement and Plan
and based upon certificates of the officers of Templeton Fund and the Trust
with regard to matters of fact:
(1) The acquisition by Franklin Fund of substantially all the
assets of Templeton Fund as provided for herein in exchange for Franklin Fund
Shares will qualify as a reorganization within the meaning of Section
368(a)(1)(C) of the Code, and Templeton Fund and Franklin Fund will each be a
party to the respective reorganization within the meaning of Section 368(b)
of the Code;
(2) No gain or loss will be recognized by Templeton Fund upon
the transfer of substantially all of its assets to Franklin Fund in exchange
solely for voting shares of Franklin Fund (Code Sections 361(a) and 357(a)).
No opinion, however, will be expressed as to whether any accrued market
discount will be required to be recognized as ordinary income pursuant to
Section 1276 of the Code;
(3) No gain or loss will be recognized by Franklin Fund upon
the receipt of substantially all of the assets of Templeton Fund in exchange
solely for voting shares of Franklin Fund (Code Section 1032(a));
(4) The basis of the assets of Templeton Fund received by
Franklin Fund will be the same as the basis of such assets to Templeton Fund
immediately prior to the exchange (Code Section 362(b));
(5) The holding period of the assets of Templeton Fund
received by Franklin Fund will include the period during which such assets
were held by Templeton Fund (Code Section 1223(2));
(6) No gain or loss will be recognized to the shareholders of
Templeton Fund upon the exchange of their shares in Templeton Fund for voting
shares of Franklin Fund (Code Section 354(a));
(7) The basis of Franklin Fund Shares received by Templeton
Fund's shareholders shall be the same as the basis of the shares of Templeton
Fund exchanged therefor (Code Section 358(a)(1));
(8) The holding period of Franklin Fund Shares received by
Templeton Fund's shareholders (including fractional shares to which they may
be entitled) will include the holding period of Templeton Fund's shares
surrendered in exchange therefor, provided that Templeton Fund's shares were
held as a capital asset on the date of the exchange (Code Section 1223(1));
and
(9) Franklin Fund will succeed to and take into account as of
the date of the proposed transfer the items of Templeton Fund described in
Section 381(c) of the Code (as defined in Section 1.381(b)-1(b) of the Income
Tax Regulations), subject to the conditions and limitations specified in
Sections 381(b) and (c), 382, 383 and 384 of the Code and the Income Tax
Regulations thereunder.
(g) That the Trust shall have received an opinion in form and
substance satisfactory to it from Messrs. Stradley Ronon Stevens & Young,
LLP, counsel to Templeton Fund, to the effect that, subject in all respects
to the effects of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws now or hereafter affecting generally
the enforcement of creditors' rights:
(1) Templeton Fund was created as a business trust under the
laws of the Commonwealth of Massachusetts on July 17, 1989, and is a validly
existing business trust and in good standing under the laws of that
commonwealth;
(2) Templeton Fund is authorized to issue an unlimited number
of shares of beneficial interest, par value $0.01 per share. Assuming that
the initial shares of beneficial interest were issued in accordance with the
1940 Act and the Amended and Restated Declaration of Trust and By-laws of
Templeton Fund, and that all other outstanding shares of Templeton Fund were
sold, issued and paid for in accordance with the terms of Templeton Fund's
prospectus in effect at the time of such sales, each such outstanding share
is fully paid, non-assessable, freely transferable and has full voting
rights;
(3) Templeton Fund is an open-end, diversified investment
company of the management type registered as such under the 1940 Act;
(4) Except as disclosed in Templeton Fund's currently
effective prospectus, such counsel does not know of any material suit,
action, or legal or administrative proceeding pending or threatened against
Templeton Fund, the unfavorable outcome of which would materially and
adversely affect Templeton Fund;
(5) All actions required to be taken by Templeton Fund to
authorize this Agreement and Plan and to effect the Plan of Reorganization
contemplated hereby have been duly authorized by all necessary action on the
part of Templeton Fund; and
(6) Neither the execution, delivery, nor performance of this
Agreement and Plan by Templeton Fund violates any provision of its Amended
and Restated Declaration of Trust or By-laws, or the provisions of any
agreement or other instrument known to such counsel to which Templeton Fund
is a party or by which Templeton Fund is otherwise bound; this Agreement and
Plan is the legal, valid and binding obligation of Templeton Fund and is
enforceable against Templeton Fund in accordance with its terms.
In giving the opinions set forth above, this counsel may state that it
is relying on certificates of the officers of Templeton Fund with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Templeton Fund.
(h) That Templeton Fund shall have received an opinion in form and
substance satisfactory to it from Messrs. Stradley Ronon Stevens & Young,
LLP, counsel to the Trust, to the effect that, subject in all respects to the
effects of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws now or hereafter affecting generally the
enforcement of creditors' rights:
(1) The Trust was created as a business trust under the laws
of the State of Delaware on September 14, 1993, and is a validly existing
business trust and in good standing under the laws of that state;
(2) The Trust is authorized to issue an unlimited number of
shares of beneficial interest of Franklin Fund, par value $0.01 per share.
Assuming that the initial shares of beneficial interest of Franklin Fund were
issued in accordance with the 1940 Act, and the Agreement and Declaration of
Trust and By-laws of the Trust, and that all other outstanding shares of
Franklin Fund were sold, issued and paid for in accordance with the terms of
Franklin Fund's prospectus in effect at the time of such sales, each such
outstanding share of Franklin Fund is fully paid, non-assessable, freely
transferable and has full voting rights;
(3) The Trust is an open-end investment company of the
management type registered as such under the 1940 Act;
(4) Except as disclosed in Franklin Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal
or administrative proceeding pending or threatened against the Trust, the
unfavorable outcome of which would materially and adversely affect the Trust
or Franklin Fund;
(5) Franklin Fund Shares to be issued pursuant to the terms of
this Agreement and Plan have been duly authorized and, when issued and
delivered as provided in this Agreement and Plan, will have been validly
issued and fully paid and will be non-assessable by the Trust;
(6) All actions required to be taken by the Trust to authorize
this Agreement and Plan and to effect the Plan of Reorganization contemplated
hereby have been duly authorized by all necessary action on the part of the
Trust;
(7) Neither the execution, delivery, nor performance of this
Agreement and Plan by the Trust violates any provision of its Agreement and
Declaration of Trust or By-laws, or the provisions of any agreement or other
instrument known to such counsel to which the Trust is a party or by which
the Trust, on behalf of Franklin Fund, is otherwise bound; this Agreement and
Plan is the legal, valid and binding obligation of the Trust and is
enforceable against the Trust and/or Franklin Fund in accordance with its
terms; and
(8) The registration statement of the Trust, of which the
prospectus, dated September 1, 1998, as amended January 1, 1999, of Franklin
Fund is a part (the "Prospectus"), is, at the time of the signing of this
Agreement and Plan, effective under the 1933 Act, and, to the best knowledge
of such counsel, no stop order suspending the effectiveness of such
registration statement has been issued, and no proceedings for such purpose
have been instituted or are pending before or threatened by the U.S.
Securities and Exchange Commission under the 1933 Act, and nothing has come
to counsel's attention that causes it to believe that, at the time the
Prospectus became effective, or at the time of the signing of this Agreement
and Plan, or at the Closing, such Prospectus (except for the financial
statements and other financial and statistical data included therein, as to
which counsel need not express an opinion), contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and such
counsel knows of no legal or government proceedings required to be described
in the Prospectus, or of any contract or document of a character required to
be described in the Prospectus that is not described as required.
In giving the opinions set forth above, this counsel may state that it
is relying on certificates of the officers of the Trust with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of the Trust.
(i) That Templeton Fund shall have received a certificate from the
President and Secretary of the Trust to the effect that the statements
contained in Franklin Fund's Prospectus, at the time the Prospectus became
effective, at the date of the signing of this Agreement and Plan, and at the
Closing, did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(j) That the Trust's Registration Statement with respect to Franklin
Fund Shares to be delivered to Templeton Fund's shareholders in accordance
with this Agreement and Plan shall have become effective, and no stop order
suspending the effectiveness of the Registration Statement or any amendment
or supplement thereto, shall have been issued prior to the Closing Date or
shall be in effect at Closing, and no proceedings for the issuance of such an
order shall be pending or threatened on that date.
(k) That Franklin Fund Shares to be delivered hereunder shall be
eligible for sale by the Trust with each state commission or agency with
which such eligibility is required in order to permit Franklin Fund Shares
lawfully to be delivered to each Templeton Fund shareholder.
(l) That, at the Closing, Templeton Fund transfers to the Trust, on
behalf of Franklin Fund, aggregate Net Assets of Templeton Fund comprising at
least 90% in fair market value of the total net assets and 70% of the fair
market value of the total gross assets recorded on the books of Templeton
Fund on the Closing Date.
9. BROKERAGE FEES AND EXPENSES.
(a) Templeton Fund and the Trust each represents and warrants to the
other that there are no broker or finders' fees payable by it in connection
with the transactions provided for herein.
(b) The expenses of entering into and carrying out the provisions of
this Agreement and Plan shall be borne one-quarter by Templeton Fund,
one-quarter by Franklin Fund, one-quarter by Franklin Advisers, Inc., and
one-quarter by Templeton Global Advisors Limited.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
(a) Anything contained in this Agreement and Plan to the contrary
notwithstanding, this Agreement and Plan may be terminated and the Plan of
Reorganization abandoned at any time (whether before or after approval
thereof by the shareholders of Templeton Fund) prior to the Closing or the
Closing may be postponed as follows:
(1) by mutual consent of Templeton Fund and the Trust;
(2) by the Trust if any condition of its obligations set forth
in Section 8 has not been fulfilled or waived; or
(3) by Templeton Fund if any condition of its obligations set
forth in Section 8 has not been fulfilled or waived.
An election by Templeton Fund or the Trust to terminate this Agreement
and Plan and to abandon the Plan of Reorganization shall be exercised,
respectively, by the Board of Trustees of Templeton Fund or the Trust.
(b) If the transactions contemplated by this Agreement and Plan have
not been consummated by January 31, 2000, the Agreement and Plan shall
automatically terminate on that date, unless a later date is agreed to by
both the Trust and Templeton Fund.
(c) In the event of termination of this Agreement and Plan pursuant
to the provisions hereof, the same shall become void and have no further
effect, and neither Templeton Fund nor the Trust, nor their trustees,
officers, agents or shareholders shall have any liability in respect of this
Agreement and Plan.
(d) At any time prior to the Closing, any of the terms or conditions
of this Agreement and Plan may be waived by the party who is entitled to the
benefit thereof by action taken by that party's Board of Trustees if, in the
judgment of such Board of Trustees, such action or waiver will not have a
material adverse effect on the benefits intended under this Agreement and
Plan to its shareholders, on behalf of whom such action is taken.
(e) The respective representations and warranties contained in
Sections 4 to 6 hereof shall expire with and be terminated by the Plan of
Reorganization, and neither Templeton Fund nor the Trust, nor any of their
officers, trustees, agents or shareholders shall have any liability with
respect to such representations or warranties after the Closing. This
provision shall not protect any officer, trustee, agent or shareholder of
Templeton Fund or the Trust against any liability to the entity for which
that officer, trustee, agent or shareholder so acts or to its shareholders to
which that officer, trustee, agent or shareholder would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties in the conduct of such office.
(f) If any order or orders of the U.S. Securities and Exchange
Commission with respect to this Agreement and Plan shall be issued prior to
the Closing and shall impose any terms or conditions that are determined by
action of the Board of Trustees of Templeton Fund or the Trust to be
acceptable, such terms and conditions shall be binding as if a part of this
Agreement and Plan without further vote or approval of the shareholders of
Templeton Fund, unless such terms and conditions shall result in a change in
the method of computing the number of Franklin Fund Shares to be issued to
Templeton Fund in which event, unless such terms and conditions shall have
been included in the proxy solicitation material furnished to the
shareholders of Templeton Fund prior to the meeting at which the transactions
contemplated by this Agreement and Plan shall have been approved, this
Agreement and Plan shall not be consummated and shall terminate unless
Templeton Fund shall promptly call a special meeting of shareholders at which
such conditions so imposed shall be submitted for approval.
11. ENTIRE AGREEMENT AND AMENDMENTS.
This Agreement and Plan embodies the entire agreement between the
parties and there are no agreements, understandings, restrictions, or
warranties between the parties other than those set forth herein or herein
provided for. This Agreement and Plan may be amended only by mutual consent
of the parties in writing. Neither this Agreement and Plan nor any interest
herein may be assigned without the prior written consent of the other party.
12. COUNTERPARTS.
This Agreement and Plan may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all such counterparts
together shall constitute but one instrument.
13. NOTICES.
Any notice, report, or demand required or permitted by any provision of
this Agreement and Plan shall be in writing and shall be deemed to have been
given if delivered or mailed, first class postage prepaid, addressed to
Franklin Real Estate Securities Trust at 777 Mariners Island Boulevard, P. O.
Box 7777, San Mateo, California 94404, Attention: Secretary, or Templeton
Global Real Estate Fund, at 500 East Broward Boulevard, Fort Lauderdale,
Florida 33394, Attention: Secretary, as the case may be.
14. GOVERNING LAW.
This Agreement and Plan shall be governed by and carried out in
accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Franklin Real Estate Securities Trust, on behalf of
Franklin Real Estate Securities Fund, and Templeton Global Real Estate Fund
have each caused this Agreement and Plan to be executed on its behalf by its
duly authorized officers, all as of the date and year first-above written.
FRANKLIN REAL ESTATE SECURITIES TRUST, on
behalf of FRANKLIN REAL ESTATE SECURITIES
FUND
Attest:
/s/ LEIANN NUZUM By: /s/ DEBORAH R. GATZEK
Assistant Secretary Deborah R. Gatzek
Vice President
TEMPLETON GLOBAL REAL ESTATE FUND
Attest:
/s/ LEIANN NUZUM By: /s/ DEBORAH R. GATZEK
Assistant Secretary Deborah R. Gatzek
Vice President
September 23, 1999
Board of Trustees
Franklin Real Estate Securities Trust
777 Mariners Island Blvd.
San Mateo, CA 94404
Board of Trustees
Templeton Global Real Estate Fund
777 Mariners Island Blvd.
San Mateo, CA 94404
Re: AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF THE 27TH
DAY OF JULY, 1999 (THE "AGREEMENT"), BY AND BETWEEN TEMPLETON GLOBAL
REAL ESTATE FUND, A MASSACHUSETTS BUSINESS TRUST ("ACQUIRED FUND")
AND FRANKLIN REAL ESTATE SECURITIES TRUST, A DELAWARE BUSINESS
TRUST, (THE "TRUST") ON BEHALF OF FRANKLIN REAL ESTATE SECURITIES
FUND ("ACQUIRING FUND")
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the reorganization of Acquired Fund which will consist of (i)
the acquisition by the Acquiring Fund of substantially all of the property,
assets and goodwill of the Acquired Fund in exchange solely for shares of
beneficial interest, par value $0.01 per share, of Acquiring Fund - Class A
("Acquiring Fund Class A Shares") and shares of beneficial interest, par
value $0.01 per share, of Acquiring Fund - Class C ("Acquiring Fund Class C
Shares") (collectively, "Acquiring Fund Shares"); (ii) the distribution of
(a) Acquiring Fund Class A Shares to the shareholders of Acquired Fund -
Class A shares ("Acquired Fund Class A Shares") and (b) Acquiring Fund Class
C Shares to the shareholders of Acquired Fund - Class C shares ("Acquired
Fund Class C Shares"), according to their respective interests; and (iii) the
subsequent dissolution of Acquired Fund as soon as practicable after the
closing (the "Reorganization"), all upon and subject to the terms and
conditions of the Agreement.
In rendering our opinion, we have reviewed and relied upon (a)
the Agreement and Plan of Reorganization, dated as of the 27th day of July,
1999, by and between the Trust on behalf of Acquiring Fund and Acquired Fund,
(b) the proxy materials provided to stockholders of the Acquired Fund in
connection with the Special Meeting of Stockholders of the Acquired Fund held
on the 16th day of September, 1999, (c) certain representations concerning
the Reorganization made to us by the Trust on behalf of Acquiring Fund and by
the Acquired Fund in a letter dated September 23, 1999 (the "Representation
Letter"), (d) all other documents, financial and other reports and corporate
minutes which we deemed relevant or appropriate, and (e) such statutes,
regulations, rulings and decisions as we deemed material to the rendition of
this opinion. All terms used herein, unless otherwise defined, are used as
defined in the Agreement.
For purposes of this opinion, we have assumed that the Acquired
Fund on the effective date of the Reorganization satisfies, and following the
Reorganization, the Acquiring Fund will continue to satisfy, the requirements
of subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company.
Under regulations to be prescribed by the Secretary of Treasury
under Section 1276(d) of the Code, certain transfers of market discount bonds
will be excepted from the requirement that accrued market discount be
recognized on disposition of a market discount bond under Section 1276(a) of
the Code. Such regulations are to provide, in part, that accrued market
discount will not be included in income if no gain is recognized under
Section 361(a) of the Code where a bond is transferred in an exchange
qualifying as a tax-free reorganization. As of the date hereof, the
Secretary has not issued any regulations under Section 1276 of the Code.
Based on the foregoing and provided the Reorganization is carried
out in accordance with the applicable laws of the State of Delaware and the
Commonwealth of Massachusetts, the Agreement and the Representation Letter,
it is our opinion that:
1. The Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a)(1)(C) of the Code, and
Acquired Fund and Acquiring Fund will each be a party to the reorganization
within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by Acquired Fund upon
the transfer of all of its assets to Acquiring Fund in exchange solely for
Acquiring Fund Shares pursuant to Section 361(a) and Section 357(a) of the
Code. We express no opinion as to whether any accrued market discount will
be required to be recognized as ordinary income pursuant to Section 1276 of
the Code.
3. No gain or loss will be recognized by Acquiring Fund upon
the receipt by it of all of the assets of Acquired Fund in exchange solely
for Acquiring Fund Shares pursuant to Section 1032(a) of the Code.
4. The basis of the assets of Acquired Fund received by
Acquiring Fund will be the same as the basis of such assets to Acquired Fund
immediately prior to the exchange pursuant to Section 362(b) of the Code.
5. The holding period of the assets of Acquired Fund received
by Acquiring Fund will include the period during which such assets were held
by Acquired Fund pursuant to Section 1223(2) of the Code.
6. No gain or loss will be recognized by the stockholders of
Acquired Fund upon the exchange of their Acquired Fund Shares for Acquiring
Fund Shares (including fractional shares to which they may be entitled),
pursuant to Section 354(a) of the Code.
7. The basis of the Acquiring Fund Shares received by the
stockholders of Acquired Fund (including fractional shares to which they may
be entitled) will be the same as the basis of the Acquired Fund Shares
exchanged therefor pursuant to Section 358(a)(1) of the Code.
8. The holding period of the Acquiring Fund Shares received by
the stockholders of Acquired Fund (including fractional shares to which they
may be entitled) will include the holding period of the Acquired Fund Shares
surrendered in exchange therefor, provided that the Acquired Fund Shares were
held as a capital asset on the effective date of the Reorganization, pursuant
to Section 1223(1) of the Code.
9. Acquiring Fund will succeed to and take into account as of
the date of the proposed transfer (as defined in Section 1.381(b)-1(b) of the
Income Tax Regulations) the items of Acquired Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381(b) and (c), 382, 383 and 384 of the Code.
Our opinion is based upon the Code, the applicable Treasury
Regulations promulgated thereunder, the present position of the Internal
Revenue Service as set forth in published revenue rulings and revenue
procedures, present administrative positions of the Internal Revenue Service,
and existing judicial decisions, all of which are subject to change either
prospectively or retroactively. We do not undertake to make any continuing
analysis of the facts or relevant law following the date of this letter.
Our opinion is conditioned upon the performance by Acquiring Fund
and Acquired Fund of their undertakings in the Agreement and the
Representation Letter.
This opinion is being rendered to the Trust, on behalf of
Acquiring Fund and to the Acquired Fund, and may be relied upon only by such
funds and the stockholders of each.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By:/S/ WILLIAM P. ZIMMERMAN/S
William P. Zimmerman, a Partner
